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MOVING TO DEFUSE SPLIT, NETANYAHU AND ARAFAT TALK

After a daylong war of words, Prime Minister Benjamin Netanyahu and Yasir Arafat, the Palestinian leader, joined tonight in seeking to defuse the rising tensions here. Mr. Netanyahu first sent two envoys to Mr. Arafat, then had a telephone conversation with him that an Israeli official described as ''amiable.''

The official, David Bar-Illan, said the two leaders had also talked about resuming negotiations on a partial Israeli withdrawal from Hebron, the Palestinian West Bank city that is home to a handful of Jewish settlers.

The contacts followed dire exchanges through the day in which Mr. Arafat warned that the Israeli Cabinet's decision on Friday to increase economic aid to Jewish settlements was a ''time bomb,'' and Mr. Netanyahu charged that Palestinian leaders were concocting ''a wave of violence.''

As the verbal jousting grew more heated, Mr. Netanyahu met with top security officials in the afternoon and then sent two senior emissaries to talk to Mr. Arafat in Gaza -- Government Secretary Danny Naveh and Yitzhak Molcho, a private attorney who has assumed an increasingly central role in negotiations with the Palestinians.

Mr. Bar-Illan, a senior aide to Mr. Netanyahu, said that the officials tried to explain to Mr. Arafat that the Cabinet's decision on Friday to grant a special economic status to West Bank settlements was intended only to bring their benefits to the levels of other hardship areas. They also spoke of the need to combat terrorism and continue the political process.

There was no immediate comment from the Palestinian Authority. But shortly after the meeting tonight, Mr. Arafat telephoned Mr. Netanyahu and the two spoke for about 10 minutes, according to Mr. Bar-Illan.

He said Mr. Arafat for the first time had expressed regret at the fatal shooting of a Jewish settler and her son last Wednesday and said he would do his best to prevent any more such attacks. Mr. Netanyahu, for his part, expressed his sorrow at the death of a Palestinian laborer who was shot by an Israeli who said he mistook him for a burglar.

''The Prime Minister wanted to make clear that he was committed to the continuation of the peace process, and that he felt the responsibility lay on his and Arafat's shoulders to bring peace, and that he was sure they could do it,'' Mr. Bar-Illan said. He said that ''the conversation was held in an amiable, friendly mood,'' and that it ended in some lighthearted banter about a session Mr. Netanyahu had just concluded answering questions over the Internet.

Mr. Arafat asked Mr. Netanyahu how he enjoyed this, to which Mr. Netanyahu said, ''I see you know everything.''

Mr. Bar-Illan said Mr. Arafat also told Mr. Netanyahu that negotiations on Hebron, which had effectively ground to a halt, should be resumed between Mr. Molcho and the top Palestinian negotiator, Saeb Erekat. There was no immediate indication when they will meet next, but Mr. Bar-Illan expressed satisfaction that ''the impasse is over and that discussions over Hebron will be resumed soon and be resolved.''

Though the contacts came too late in the day to be widely reported, they were expected to relieve the tensions that have been mounting in recent weeks, and especially last week, after Palestinian gunmen fired on a family of Jewish settlers traveling by car near the West Bank settlement of Beit El on Wednesday and killed a mother and her son.

On Friday, in the heat of anger over the shooting, the Israeli Government voted to restore special economic status to West Bank settlements, including tax benefits and investment credits. The status, intended for depressed areas, was taken away from the settlements by the former Labor Government in 1992.

Though the decision did not include any actual expansion of the settlements, it brought immediate criticism from Western governments, and dire warnings of confrontation from the Palestinians. In September, more than 70 Palestinians and Israelis died when tensions erupted in violence.

Washington called the settlement decision ''troubling,'' and the European Union charged that the issue ''is eroding confidence in the peace process.'' Ehud Barak, a strong contender to be the next leader of the Labor Party, said that the Government's handling of the matter ''is leading to an explosion with the Palestinians.''

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Mr. Arafat loosed several barrages, the strongest in an interview with the mass-circulation Israeli daily Yediot Ahronot.

''Netanyahu knows that this is a time bomb with many dangers,'' he said of the settlement decision. ''Don't they understand where they are dragging the region? In the end, it will be impossible to stop the downward flight. After the dead are laid to rest, we will be standing in the same place. What is the wisdom of this inflexibility?''

Mr. Netanyahu responded with his own volley of statements and interviews, arguing that the subsidy decision was not a violation of the agreements signed by the previous government and that the action did not include the establishment of new settlements.

As he has often done when his actions have come under fire, Mr. Netanyahu sought to portray himself as defending an Israel from the perpetual assault of a hostile world.

''I'd like to remind you that for a hundred years of Zionist settlement there was always international resistance to settlement,'' he said over Army Radio. ''The reason the settlements were successful is because we were able to overcome this resistance. If you give in at Beit El or somewhere else where pressure is exerted through terror, do you really think it will end there? We are under an attack aimed at us all.''

Mr. Netanyahu also charged that ''senior officials on the Palestinian side have been planning for weeks a wave of violence because they don't want to continue the process.''

''What nonsense,'' Mr. Arafat replied in his interview. ''What would we gain from this? The talk about the option of igniting the territories by us is cheap propaganda, behind which lurk dirty intentions.''

The verbal jousting contributed to a sense that relations between the sides were spinning out of control, with each seeking to shift blame onto the other for any violence that might ensue.

Though the Government's decision on Friday was intended in part to placate settlers after the shooting of the woman and her son, settler leaders declared that the economic incentives were not enough, and continued to clamor for new settlements in meetings today with Defense Minister Yitzhak Mordechai.

A tight Israeli cordon around the Palestinian-controlled city of Ramallah, erected after the shootings, was further tightened today, raising loud complaints from residents.

The Palestinian police reportedly rounded up several suspects in the shooting, which the Marxist faction known as the Popular Front for the Liberation of Palestine said it had carried out. Palestinian officials continued to insist that Palestinians would not be extradited to Israel, but there were reports that they would forward photographs to the Israelis to help identify the attackers.

The rise in tensions dominated Israeli and Palestinian news media.

''The new situation created by the Government decision on Friday leads us toward a moment of truth, to an hour of unavoidable confrontation,'' wrote Yaakov Erez in a front-page analysis in the daily Maariv. ''A minute before midnight, Benjamin Netanyahu must put a halt to this downward spiral.''